The African Growth and Opportunity Act (AGOA) of 2000 marked a significant shift in American-African policy, and more broadly in United States development policy, shifting the trade relationship between the American and African markets from l aid for trade. While the duty-free / quota access offered by AGOA is a strength, the policy has largely underperformed in substantially increasing diversified African exports and has done little to stimulate US investment. in Africa. The last decade has seen the launch of Power Africa and Prosper Africa at the United States Agency for International Development (USAID), as well as the new American International Development Finance Corporation (DFC), with the aim of stimulating a response to investments. However, they have yet to generate significant investor interest in African opportunities, as U.S.-African trade continues to decline or plateau. To remain competitive in many of the world’s fastest growing countries, the United States must innovate in the way it seeks to support investment in African markets. Just as technological innovation requires experimentation, so US trade policy in African markets must embrace and operationalize experimentation.
With African markets that are younger, more connected and better integrated than ever before, the U.S. approach to doing business on the continent needs to be rethought. Currently, half of Africa’s population is already connected to a smartphone, and in less than ten years, Africa will be home to seventeen cities with more than five million inhabitants. Despite COVID-19, the The International Monetary Fund estimates a return to 3.2% growth in African markets in 2021, equaling 2019 levels and reaching 3.9% in 2022. This economic resilience, coupled with positive demographic trends, positions African countries as ideal markets for American capital seeking diversification, yield and higher yields. However, the active mobilization of investments, especially of small and medium-sized enterprises and less traditional asset classes such as institutional investors and venture capital, has not been in the DNA of USAID or the DFC. newly operational. Creative and collaborative thinking will be needed to determine what policies will work in this new era that will ultimately benefit the American and African economies.
Most commonly seen in technology and research and development (R&D) organizations, rapid and iterative experimentation with a willingness to fail often leads to better solutions. Yet this philosophy is not routinely implemented in the formation or execution of US trade or development policy. To increase the effectiveness of large efforts to leverage U.S. investment in African markets, such as Prosper Africa and its upcoming Proper Africa Trade and Investment (PATI) initiative, a team should be tasked with experimenting with small-scale policies to to determine effective means of stimulating investment. This new team could be housed at the Department of Commerce or the expanded Small Business Administration (SBA) International Trade Office, given their national reach and respective mandates to improve the competitiveness of U.S. businesses globally.
Although significantly different in terms of scope and resources, the organizational model of the Defense Advanced Research Projects Agency (DARPA), responsible for developing emerging technologies for the US military, could be an innovative role model for the team as the underlying principles are not defense-specific. According to a former director, DARPA has three mutually reinforcing elements: ambitious objectives, temporary project teams and independence. The substantial increase in bilateral trade and investment between the United States and Africa is an ambitious goal, and just like the problems that DARPA is tackling, is unlikely to happen without a catalyst. Temporary project teams are an essential aspect of a successful DARPA project. The time limit attracts high caliber talent who may be willing to leave the private sector for two years, but not decades. Taking a small aspect of American-African trade policy, let’s say how expanding partnerships between Hollywood and Nigerian Nollywood, could benefit from a small team dedicated to the challenge for two years. Finally, the effort must be independent. The team must be empowered not only to choose which projects to work on, avoiding political and agency priorities, but also to have the financial freedom to fail.
A recent project between Prosper Africa and the Center for Strategic and International Studies (CSIS) sought to uncover the obstacles that US companies face in African markets by hosting virtual roundtables in three US cities. Companies have shared a myriad of reasons they are reluctant to invest, from the lack of consistent support from the U.S. government to issues with data policy in some African countries. This project served as a unique experience to match industry interests with US cities. But it doesn’t have to be unique. What is needed now is a systematic learning process and an ability to test potential solutions, working directly with experts from the private sector. And above all a recognition from the outset that American policy makers and their traditional partners do not have all the answers, but rather a willingness to experiment and to let certain efforts fail.
Given the size and breadth of the US economy, mobilizing US investment in African markets will require experimentation. As a starting point, this new team could focus on experiments in three main areas: messaging, education and structure. First, policymakers need to better understand how to effectively present African investment opportunities to US investors. Despite years of economic progress and governance in African countries, old stereotypes persist and US investment stagnates. By organizing focus groups and drawing on innovative PR and marketing firms, this team could experiment with new messaging tactics to find out what works and what doesn’t. Beyond the message, effectively educating different types of investors, from venture capitalists to pension fund administrators, requires some experimentation. This includes everything from determining who within those organizations are the appropriate targets for education to understanding the up-to-date and actionable data needed. And finally, experiment with the structure. While DFC already has experience structuring agreements to attract private sector actors and USAID has developed expertise in blended finance, further experimentation with the structure of agreements could focus on how to induce US private investors or others who have not traditionally worked with the US government. agencies.
Ultimately, as US-African politics evolve, so too must the approaches taken, including those that relate to the generation and development of future policies and programs. Proven models like DARPA can serve as inspiration for a new way of thinking about development policy, which is experimental, agile and ultimately takes more account of the needs of investors. With the growth and changing opportunities in African markets from year to year, now is the time to experiment with how to better engage U.S. investors to ensure U.S. businesses remain active and competitive for decades to come.
Aubrey Hruby is a senior fellow at the Africa Center of the Atlantic Council. She is also the co-founder of Insider and the Africa Expert Network. Follow her on Twitter @AubreyHruby.
Tue, June 1, 2021
A well-done American-African summit
The last decades of Africa’s world politics can be defined in one word: summit. After a five-year absence from the summit scene, a relaunched US-African summit under the Biden administration is obvious.
Mon Apr 19, 2021
African-American Trade Policy Priorities in the Biden Administration
This new decade has created a unique moment for the Biden administration to reset African-American politics. A more diverse and nuanced engagement with African states will lay the groundwork for stronger US-Africa partnerships, support mutual economic growth, and help strengthen US global leadership.
Thu Apr 8, 2021
The imperative of digital infrastructure in African markets
Over the past two decades, Chinese companies have dominated the telecommunications infrastructure landscape in emerging markets. The United States can slow and possibly erode these Chinese gains by promoting innovative American technologies and providing resources to help spark the second wave of the Internet revolution in African countries.